NYX Nyse Euronext

NYSE Euronext (NYX) said Tuesday that first-quarter profit rose 25% as its expanding derivatives business countered the impact of fierce price competition in the European stock trading sector.

For the first time, the transatlantic exchange group derived more than half of its operating profit from futures and options trading, and matched analysts' expectations after four straight quarters of beating forecasts.

The profit gain follows months of jitters in European markets centered on the credit travails of nations like Greece, Portugal and Spain, driving investors toward fixed-income derivatives traded on NYSE Euronext's U.K. futures platform.

Michael S. Geltzeiler, chief financial officer for the exchange company, on a conference call Tuesday cited ongoing volatility around the euro and European interest rates as driving a 25% rise in open interest in NYSE Liffe's fixed-income product range last month, with a record 12.4 million contracts changing hands April 28.

"The challenges in the southern part of Europe and the debt levels are creating anxiety and putting pressure on the rates," said Geltzeiler in an interview.

The more-profitable business of listed derivatives continues to be a focus for NYSE Euronext as stock trading remains under pressure from a roster of upstart electronic platforms in the U.S. and Europe, pressuring fees.

In Europe, NYSE Euronext reported that its revenue per trade slipped from $1.12 to $0.80 over the past year, though trading activity rose slightly from the year-ago period. In the U.S. the exchange saw overall revenue dip as the average number of shares traded per day over the quarter fell from 4 billion to 2.5 billion year-on-year.

Net profit for the three months ended March 31 increased to $130 million from $104 million a year earlier, while earnings per share rose to 50 cents from 40 cents.

First-quarter earnings included costs from the acquisition of Nyfix, a trading technology company. Excluding pretax merger expenses and exit costs, profit was $140 million in the first quarter, or $0.54 per diluted share, up from $112 million and $0.43 a share in the first quarter of 2009.

Shares in NYSE Euronext were recently down 1.4% at $32.55.

The company said it made $175 million from the sale of National Stock Exchange of India after the end of the quarter. Singapore's state-owned investment company Temasek Holdings Ltd. bought the 5% stake, according to people familiar with the situation.

Proceeds of the sale will be used to repay debt, according to Geltzeiler, though no significant effect on the company's balance sheet is expected.

Geltzeiler said that NYSE Euronext is winning "the majority" of initial public offerings qualified to list on the company's markets, with ten new technology-oriented floatations in the pipeline.

NYSE Euronext has also sold nearly all of the space available for co-location in its under-construction data center facilities in the U.S. and U.K., designed to facilitate faster trade times and offer a platform for selling other technology services.

Co-location allows trading firms to position their systems close to an exchange's trading engines, key to high-frequency participants, which are estimated to make up about two-thirds of U.S. stock trading activity.

The practice lags somewhat in Europe, where high-frequency trading is estimated to account for about 30% of trade on NYSE Euronext's markets.

-By David Pearson and Jethro Mullen, Dow Jones Newswires; +331 4017 1740, david.pearson@dowjones.com, hethro.mullen@dowjones.com

(Doug Cameron contributed to this article.)

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